National Economic update as it effects Incline Village home values and prices.

We need to look at a few important indicators not cited among this week’s column of Key Indicators. The Index of Leading Indicators, for example, gained 0.4%, as reported on April 21st. Analysts read this as an indication that the current strength of the economy will likely be sustained through the end of the year. It does not, however, suggest that the economy will improve significantly during the relatively near term.

 

The good news contained in the latest Standard & Poor’s Case-Shiller Index, released Tuesday, was that there wasn’t much news. More specifically, real estate prices fell very little in February. (There was a 0.3% and a 0.4% decline in the 10-city seasonally adjusted price analysis for the prior two months.) This is a slim reed on which to hang our forecasting hat and that brings up the primary message from this week’s indicators.

 

Remarkably, the chief economist for the National Association of RealtorsÒ, Lawrence Yun, stated plainly, “We’re clearly on a recovery path.” The assessment is remarkable because it is so difficult to find others who agree with Yun. Most people prefer to hedge their bets.

 

Frank Nothaft, for example, the vice president and chief economist for Freddie Mac, is not as sanguine. "The housing market continues to struggle," he declares. "Although housing starts and existing home sales in March were stronger than the market consensus, they were still at low levels."

 

These comments represent a very different view of the market—and from two economists who are often advocates of real estate with similar stories to tell. Can we reach any conclusion from their unusual divergence of opinions?

 

Quite possibly we can. Rarely has the real estate market and, in particular, the credit (or interest rate) market been as difficult to predict as it is now. We are likely to get initial hints from the Fed about when and exactly how it is going to dismantle the QE2 program, ceasing its support for longer-term Treasury securities. And we are watching astonishing changes in the price of gold and oil, along with an unpredictable political battle over ways to reduce our nation’s indebtedness. It’s all a wide-open game, and no one can make assured predictions of how any of it will turn out.

 

There are at least two pieces of good news, however. First, with a higher Pending Sales Index two months ago, other indicators—purchase money mortgage applications, for example—finally turned positive and February’s new and existing home sales reports looked noticeably sunnier. Second, a necessarily ambivalent observation: The markets aren’t showing obvious signs of panic in the face of so many uncertainties. Perhaps we’ll make it to the mild warmth of the spring selling season—and reasonably soon.